Duration Analysis Introduction Some response variables in economics come in the form of a duration, which is the time elapsed until a certain event occurs. A few examples include weeks unemployed, months spent on welfare, days until arrest after incarceration | Duration Analysis Introduction Some response variables in economics come in the form of a duration which is the time elapsed until a certain event occurs. A few examples include weeks unemployed months spent on welfare days until arrest after incarceration and quarters until an Internet firm files for bankruptcy. The recent literature on duration analysis is quite rich. In this chapter we focus on the developments that have been used most often in applied work. In addition to providing a rigorous introduction to modern duration analysis this chapter should prepare you for more advanced treatments such as Lancaster s 1990 monograph. Duration analysis has its origins in what is typically called survival analysis where the duration of interest is survival time of a subject. In survival analysis we are interested in how various treatments or demographic characteristics affect survival times. In the social sciences we are interested in any situation where an individual or family or firm and so on begins in an initial state and is either observed to exit the state or is censored. We will discuss the exact nature of censoring in Sections and . The calendar dates on which units enter the initial state do not have to be the same. When we introduce covariates in Section we note how dummy variables for different calendar dates can be included in the covariates if necessary to allow for systematic differences in durations by starting date. Traditional duration analysis begins by specifying a population distribution for the duration usually conditional on some explanatory variables covariates observed at the beginning of the duration. For example for the population of people who became unemployed during a particular period we might observe education levels experience marital status all measured when the person becomes unemployed wage on prior job and a measure of unemployment benefits. Then we specify a distribution for the unemployment duration conditional
